Copper Prices Plummet Amid Dollar Strength and European Sovereign Debt Worries

Copper prices hit a sour note as the dollar surged, fueled by concerns over Portugal's potential sovereign debt troubles and a downgrade in the euro against the greenback. The December delivery contract on the Comex division of the New York Mercantile Exchange dipped 1.7%, or 6.3 cents, to $3.7235 per pound, as investors scaled back exposure to risky assets and wondered about the impact of a potential European recession on copper demand.

Key Takeaways:

• Copper prices plummeted 1.7% or 6.3 cents to $3.7235 per pound due to dollar strength and concerns over Portugal's sovereign debt troubles.
• The euro hit a two-month low against the greenback, reaching $1.3240 from $1.3361 late Thursday, further weighing on copper prices.
• The potential for China to raise interest rates to curb inflation also tempered copper demand, with traders worried that the move will slow economic growth.
• The Shanghai Futures Exchange announced margin increases on copper, aluminum, and zinc contracts from November 30, which is typically a catalyst for traders to exit the market.
• Ira Epstein, director of the Ira Epstein division of The Linn Group, attributed the decline in copper prices to fears that the economic downturn in Europe will hinder industrial growth.

Statistics:

• Copper prices fell 1.7% or 6.3 cents to $3.7235 per pound.
• The euro hit a two-month low against the greenback at $1.3240.
• The dollar strengthened, making dollar-denominated copper appear more expensive to buyers using foreign currencies.
• The Shanghai Futures Exchange will raise margins on copper, aluminum, and zinc contracts from November 30.
• Ira Epstein stated that the concern over industrial growth is "scaring traders away from copper."

Sources:

• Dow Jones Commodities News via Comtex, November 26, 2010.
• Tatyana Shumsky, Dow Jones Newswires, 212-416-3095, tatyana.shumsky@dowjones.com.